You don’t have to work in construction to know that the industry has been hit particularly hard by the Great Recession and improvement has been moving at a molasses-like pace. Though home prices are rising in some areas, new growth in residential and commercial building remains largely flat.
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Though it has a history of use going back hundreds of years, factoring accounts receivables remains a puzzling activity to many in part because of confusion and misinformation.
Consumers today have more choices to pay for the products and services they want, including credit cards, debit cards, personal checks, e-payments, electronic funds transfer, and good ole’ fashioned cash. While many consumers may prefer the convenience of credit and debit cards or PayPal for their online purchases, cash remains king for business owners.
With the rise of alternative financing and lending options as well as the persistence (though drop) of traditional lending options, small businesses today have a lot of options to choose from when considering funding. As alternative financing options such as accounts receivable factoring continue to rise in popularity, there still remains some confusion regarding how they work, particularly with regard to their accounting practices and procedures.
Since the banking and economic flop of 2008, lending by traditional banks has dropped considerably for small business loans according to USA Today. Coinciding with that trend, various forms of alternative lending has increased as businesses that get denied for term loans seek other sources of funding.
Give the Customers What They Want with Manufacturing Financing
Industry: HVAC Manufacturing Company
Location: Dallas, TX
How Much? $100K Factoring Line
Oil and Gas Financing Overflows to Secondary Businesses
Industry: Power Washing Company for Oil & Gas
Location: Oklahoma City, OK
How Much? $75K Factoring Line
Is the state of financial lending getting better or worse? The answer to that appears to be yes. Yes, according to a recent report by the Small Business Administration’s Advocacy Group, small business loans are on the increase having picked up 10 percent over the past year. But also, and you knew this was coming, the numbers from the same report seem to indicate that dollar amounts per each term loan itself, has decreased in total value (by about 3 percent). In other words, according to the Wall Street Journal banks seem to be offering up more small business loans though the actual dollar value of those loans appears to be slightly shrinking.
In both your business and your personal realm, operating within a set budget is a fact of life for healthy sustainability. You have to find a way to balance what you spend with what you earn so that you have the products and services you need, without paying for too much of what you don’t.
Though business invoice factoring or accounts receivable factoring has been around for hundreds of years, it is new to a lot of businesses and therefore may bring about confusion, particularly regarding how it will affect your finances. As a business decision maker, you care not alone in having this concern. So let’s take a closer look at how factoring receivables will affect your books.